When I was a kid, I accepted things pretty much as they were. Sure, I would fantasize about being the next Otto Graham or Joe DiMaggio, but I never dreamt of distorting reality. For example, I caddied at a prestigious Country Club and would get to play there on Mondays. Like all golfers, I used to visualize my shots before I struck the ball. If I had done what I had visualized, I would have made Ben Hogan look like a duffer. But I hardly ever made shots as I had visualized and I had to accept the consequences of my failures. I never thought of changing fact to fantasy back then, but I learned how it's done later in life.

I learned this wonderful skill from a bunch of whiz kids from the best business schools in the country. If they didn't like a business or situation, they just sold the business or took an eraser and changed the numbers. Selling a business or changing numbers is easy. It takes no skill or expertise. But it's not dealing with reality. As a chemical engineer, I had to deal with physical reality. If a vessel were leaking a poisonous chemical, we had to physically fix the leak. We couldn't stop the leak by assuming it wasn't leaking. A lot of people in today's world don't understand that because they never dealt with physical reality. So they create a fantasy world of false assumptions and distorted numbers that doesn't exist. They are lying to us, and we believe them.

Today we got the CPI inflation report for May 2007. It showed that consumer prices rose at the fastest rate in 20 months, powered by surging food and energy prices. That's really bad news -- but not if you don't count food and energy prices. "They're too volatile." The core rate of inflation, i.e., without food and energy, rose only 0.1 percent in May, much less than 0.7% for all items. So today's inflation report was really good news. Really?

What we have here folks, is The Federal Reserve Board's version of "The Big Lie" as promulgated by Adolph Hitler and Joseph Goebbels. Make the lie preposterous enough, make it big enough and repeat it often enough and the "thick-headed numbskulls" will believe it. Indeed, stock traders swallowed the spin and stock prices took off. Even if you're offended by Wall Street's antics, forget about it. It's more profitable to fly on the wings of Inflation Fantasies.